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Three ‘hard truths’ about Canada’s trade

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6 minute read

From the Fraser Institute

Author: Jock Finlayson

In Canada’s case, a small number of sectors reliably generate significant trade surpluses, which help finance large trade deficits incurred in other parts of our economy.

Canada is an “open” economy that depends on cross-border flows of trade, investment and data/knowledge to maintain high living standards. To pay our way in a very competitive world, Canadians must produce and sell goods and services to customers in other countries. These exports furnish the means to pay for the vast array of imports that contribute to the well-being of Canadian households and allow our businesses to operate efficiently and grow by accessing bigger markets.

In 2022, Canada exported $779 billion of goods to other countries, along with $161 billion of services, for a total of $940 billion. The services category includes a wide array of commercial services including professional, scientific, technical, digital and financial, as well as transportation services and international tourism (when non-Canadian visitors travel to spend money here).

About three-quarters of Canada’s exports are destined for a single market—the United States, whose economy has steadily expanded in size over time to reach some US$25 trillion of gross domestic product today. Canada also sources the bulk of our imports from the U.S.

The centrality of the American market to Canada’s economic prosperity is the first “hard truth” about Canada’s trade, a point explored in a recent paper by Steve Globerman. Despite periodic efforts to diversify Canada’s trade and commercial links over the last 50 years, Canada remains as closely tied to the American economy today as we were in the 1990s. There’s little reason to believe the Trudeau government’s recently unveiled “Indo-Pacific” strategy will change the situation. Proximity, a common language and business culture, and the impact of extensive and unusually deep business and personal ties all serve to reinforce the American-centric character of Canada’s trade. It follows that the U.S. should continue to figure prominently in the trade promotion and investment attraction activities of Canadian governments.

A second “hard truth” about Canada’s trade is the outsized place of natural resource-based products in the export mix. The first table below breaks down Canada’s goods and services exports in 2022 into the main groupings.

Table 1

Added together, energy, non-metallic minerals and related products, metal ores, forest products and agri-food comprise almost half of the country’s total international exports of goods and services combined. Energy alone supplied 27 per cent of Canada’s merchandise exports (and 23 per cent of total exports) last year, generating a remarkable $212 billion in export-driven income for Canadian businesses, workers and governments.

Within the energy basket, oil and oil-based products dominate, providing about three-quarters of energy-based export revenues. Contrary to innumerable speeches and press releases issued by the current federal government, the energy share is likely to rise in the next several years, as LNG production from British Columbia comes on-line and Western Canadian oil exports increase following the completion of pipeline expansion projects.

The final “hard truth” is closely related to the second but carries a more nuanced message. Ultimately, every country will have a ledger showing the trade surpluses and trade deficits across its various industries. In Canada’s case, a small number of sectors reliably generate significant trade surpluses, which help finance large trade deficits incurred in other parts of our economy.

The second table provides a snapshot of Canada’s trade “balances”—the mix of deficits and surpluses by broad industry category.

Table 2

The story is a fairly simple one; positive trade balances in the energy, mining, forestry and agri-food sectors offset chronic—and in some cases very sizable—trade deficits in consumer goods, chemicals and plastics, motor vehicles/parts, and industrial and electronic goods. We also run a smallish deficit in our overall services trade.

The trade data are informative. Among other things, they tell us where Canada has, in the language of economists, a “comparative advantage” in the global context. For a market-based economy, a pattern of positive trade balances is evidence that it very likely enjoys a comparative advantage in the industries which report consistent trade surpluses. Armed with such information, smart policymakers should strive to create and sustain an attractive business and investment climate for the industries that produce trade surpluses. Unfortunately, this is a lesson that today’s federal government in distant Ottawa has struggled to digest.

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Five Government Programs That Musk’s Government Efficiency Agency Could Put On The Chopping Block

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From the Daily Caller News Foundation 

By Robert Schmad

Federally-funded progressive pet projects and wasteful spending alike could be on the way out if Elon Musk succeeds in his quest to improve the administrative state’s efficiency.

Right-of-center policy experts previously told the Daily Caller News Foundation that they hope Musk’s Department of Government Efficiency will improve federal data collection practices and cut wasteful expenditures. Musk took to X on Thursday to express his openness to reeling in federal spending on transgender research and diversity, equity and inclusion (DEI) programs.

In July, the United States of America’s debt surpassed $35 trillion for the first time in history, with the balance expected to exceed $36 trillion in the near future.

Over the past year, the DCNF has collected dozens of examples of wasteful or otherwise strange programs the Biden-Harris administration has pumped public funds into, feeding the deficit. Here are five examples of what could come under scrutiny from Musk’s efficiency agency.

1. Improper Payments

The Biden-Harris administration is on track to have paid out over $1 trillion in improper payments by the time President-elect Donald Trump takes office and the Department of Government Efficiency gets to work in January 2025. Federal guidelines define an improper payment as any disbursement “made by the government to the wrong person, in the wrong amount or for the wrong reason.”

Common examples of improper payments include erroneous payments made through the Medicaid and Medicare systems, misallocated COVID-19 aid, benefits paid to dead people and taxpayer funds lost to fraud. Large sums of improper payments are not a problem unique to the Biden-Harris administration. During Trump’s first administration, the government disclosed $814 billion in inflation-adjusted improper payments.

Not all improper payments are totally lost after being sent out. The Biden-Harris administration managed to recover about $51 billion of the $235.7 billion it erroneously disbursed in 2023.

Both parties have expressed concern about the magnitude of improper payments put out by the federal government, with a bipartisan group of legislators in the House pushing the Improper Payments Transparency Act, a bill introduced in May that would require the president’s budget request to identify common payment errors and formulate ways to address them.

2. Tax Dollars Funding LGBT Activism Abroad

Spokespeople for the State Department have previously told the DCNF that promoting LGBT inclusion in other countries is a “foreign policy priority” of the Biden-Harris administration, a statement supported by materials the agency publishes.

Under President Joe Biden, the State Department and The United States Agency for International Development (USAID) have spent millions working to fund transgender surgeries, bankroll LGBT activists and engage pro-transgender in social engineering abroad.

USAID, for instance, gave $2 million to Asociacion Lambda, a Guatemala-based organization, to both engage in pro-LGBT activism and to provide people with “gender-affirming care,” federal records show. Asociacion Lambda attempts to influence elections in Guatemala and meets with government officials to engage in advocacy.

The State Department, meanwhile, funded the production of a play in North Macedonia where God is portrayed as a bisexual that has constant sex with hermaphroditic angels and communists are painted in a positive light.

“Americans are far from agreeing on how to deal with race, sex, and ‘gender’ in schools and workplaces,” Heritage Foundation senior research fellow Simon Hankinson wrote in a 2022 report. “Even when U.S. national consensus is there, restraint is always necessary in attempting to convince other nations that one’s own values should be theirs. The U.S. must balance the likelihood of convincing potential allies with the likelihood of hostile reactions to perceived interference or ‘cultural colonialism.’”

Other programs the Biden-Harris administration approved to push homosexuality and transsexuality abroad included bankrolling the creation of 2,500 “LGBTQI+ allies” in India, using tax dollars to “foster a united and equal queer-feminist discourse in Albanian society,” staging a film festival in Portugal featuring incestual and pedophilic themes, funding gay pride events across the globe and deploying public funds to support the work of “queer” Muslim writers living in India.

3. ‘Indigenous Knowledge’ Grants

In November 2022, the Biden-Harris administration released a memo defining indigenous knowledge as “a body of observations, oral and written knowledge, innovations, practices, and beliefs developed by Tribes and Indigenous Peoples through interaction and experience with the environment” that “is applied to phenomena across biological, physical, social, cultural and spiritual systems.”

From 2021 to 2023, the Biden-Harris administration approved more than $831.8 million in grants that encouraged the use of indigenous knowledge in service of achieving the Biden administration’s goals.

The Department of Commerce, for instance, earmarked $575 million in June 2023, asking third parties to utilize indigenous knowledge to help mitigate the impact of weather events caused by climate change. The Centers for Disease Control and Prevention, meanwhile, made an estimated $18.75 million available in August 2023 for grantees to apply “Indigenous knowledge methods,” alongside other approaches, as part of a program intended to test experimental methods of reducing drug overdose.

The 2022 Biden-Harris administration memo ordered agencies to “recognize and, as appropriate, apply Indigenous Knowledge in decision making, research, and [their] policies.” Agencies were also instructed to consult with Indian spiritual leaders and not to assume that indigenous knowledge is incorrect when “Western” science contradicts it, with the memo calling science a tool of oppression.

“When I start hearing things about how there’s this other dimension where, you know, the animals interact with humans at a different level of reality, that’s just not a thing,” City University professor and biologist Massimo Pigliucci told the Washington Free Beacon, in reference to their reporting on the subject. “You can believe that and you have the right to believe it but it’s not empirical evidence.”

4. DEI at the VA and Beyond

As hundreds of thousands of veterans were stuck on benefit waitlists, Biden’s Department of Veterans Affairs (VA) took at least a dozen actions aimed at expanding DEI within the agency.

The VA had 378,000 claims from veterans that had been pending for at least 125 days at the end of 2023, according to the agency. In September 2021, shortly after Biden took office, the VA had just 210,854 claims that had been backlogged for the same length of time.

While the number of disabled veterans waiting on support grew, the Biden-Harris VA was focused on doing things like establishing an Inclusion, Diversity, Equity and Access Council, working on making its contractors more racially diverse and engaging in marketing campaigns aimed at reaching out to the “LGBTQ+” community and female veterans.

The VA is far from the only federal department that leaned into DEI in recent years as the various branches of the federal government collectively spend millions per year on diversity trainings. The Department of Health and Human Services alone spends tens of million per year on DEI programs and staff. Roughly a third of the funds disbursed by the National Science Foundation promoted DEI, according to a recent Senate Commerce Committee report.

5. Inventing Gay Landmarks

America’s national parks faced an estimated $23.3 billion maintenance backlog at the end of the 2023 fiscal year, according to a July report from the Congressional Research Service. While public parks languished, the National Park Service (NPS) diverted public funds to its “Underrepresented Communities Grant Program,” which is designed to diversify America’s historical landmarks to better include racial and sexual minorities.

During Biden’s tenure in office, NPS paid an array of government agencies and nonprofits to seek out “historic” LGBT locations to be placed on the National Register of Historic Places. When NPS approves a landmark to be added to the National Register of Historic Places, its owner becomes entitled to special tax breaks, with many state and local governments offering special grant programs for such locations.

NPS, for example, paid out $75,000 to Washington State’s Department of Archaeology and Historic Preservation for it to identify an “outstanding representation of queer history” and nominate it to be listed on the National Register of Historic Places. The service has spent $7.5 million on its Underrepresented Communities Grant Program since 2014, with Congress apportioning $1.25 million for the 2024 iteration of the program.

America’s national parks are billions of dollars behind on maintenance related to roads, buildings, water systems and campgrounds, according to the congressional report.

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Red Deer City Budget 2025: An Opportunity for Council to Step Up for Taxpayers

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Opinion on Red Deer City Budget 2025

By Al Poole

I have lived in Red Deer for 45 years and loved every year. So happy to be here.

Having said that, I see things, patterns over time, that worry me. When I worry I dig deeper – I just  need to understand.

Budget 2025: Wow – a massive document. I can only imagine what it cost to build this document. Even more concerning – the amount of time and effort for council members to understand. Crazy!

I will say up front – I wonder if anyone on council has a good grasp on operations performance
based on the budget – as presented. If I am correct, what does that say for citizens of Red Deer
understanding? [note: I do not equate understanding with agreement]

This could be so much easier. Council needs to insist this becomes clearer and easier to understand. (I can help).

As in the past, generally, I find this another document reads from a position of fear and defensiveness – simply looks like justifying “what we do is already the best”. Why would you do that to yourselves?

It starts at the top – the City Manager message is not inspiring. It lacks the leadership that says I got this and here is what I am going to do to correct our current course.

Upfront, an area that confuses me is the reserve transfers.  I find it hard to get a real good grasp on spending. I will work to close that gap soon.

Back to the document, a couple of things that caught my attention and I find encouraging. In the
Executive Summary, item 4 on page 5:  establish expectations of Administration to achieve a positive variance to budget. I presume this means a fair budget that requires Administration to be more effective and efficient in executing its work (i.e. not only from more tax revenue).  I applaud you writing it down – achieving it is akin to retained earnings in my work world (for City – healthy reserves). Second, the citizen surveys in the spring and then the fall.  They serve as a great guide for Council and Administration.

The City’s current financial situation is not great. If you understand and accept how we got here – the path forward becomes clearer.  Based on what I see in the document you have not understood or accepted. It still appears it’s the taxpayer who is carrying most of the load.

It is interesting that the citizen surveys point to reducing the size of City organization. That tells me everyone, without knowing the details, has a good sense that the City Operations are not as effective or efficient as they could be. I know some of you know it to be true, as well.

Ok – let’s delve into the budget. I like the breakout in TTAX sheet, page 65.  I commend Administration for projecting a positive variance over 4% Good job.  Now, a bold move demonstrating real leadership would be to take the projected 2024-year end outcome and make that the 2025 budget — and still deliver a positive variance in 2025.  Instead, all of that seems to have been lost – the 2025 budget is 6.3% higher. Who thought this an acceptable approach.

Secondly, Considerations and Bold Moves on page 71.  The title is impressive — the content is anything but bold.

If you were to assume, based on preamble, I started this review with skepticism – you would be correct.  The two items above, a 6.3% increase to base budget and lack of bold moves are absolute derailers for me. Given our financial position – regardless of how we got here – I am ok with, as a taxpayer, to help improve the financial position of my city.  Note: I said help – not carry it all. You totally missed it.  Why would I as a tax paying citizen, or any other citizen believe we are being served by strong informed leadership?  In essence you are pushing all of the fix onto us.

In closing – to keep it clear and simple: show me the math to $18,201,505 tax revenue increase.  I can not find a pathway to that number.  I realize MGA dictates certain rules you must follow – but it does not stop you from presenting a clear picture. Also, why would you list $512,317,612 – like it is the cash you will spend. Roughly, $89M is non-cash – it is an accounting transaction. I would like to see a summary of financials so I can reasonably assess how operations are doing — akin to EBITDA line in the for-profit world. In the absence of that summary, I have little confidence in Councils ability to reasonably assess operating performance.

I know from experience large organizations tend to grow organically and suffer from increasing
inefficiency over time unless specific actions are taken to correct the course.

You have a chance as Council and Administration to demonstrate leadership – the type that earns
trust and respect. Step up!

It is my intent to be helpful. I am happy to chat in more detail.
Al

PS: Please do not come back to me with it is a complicated operation and you do not understand.
I concede City operations have complicated elements but the nice thing about complicated – it
leads to prescriptive processes/procedures (easy to monitor and evaluate). Now on the revenue
side – there are some complexities that require more nuanced solutions.

Al Poole is a business and community leader. Former Site Leader Joffre Complex, Poole served with the United Way Central Alberta and Red Deer College.

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